Best Mutual Funds to Invest for 20 Years Through SIP
The best thing about investing in mutual funds through Systematic Investment Plan (SIP) for 20 years is that you can start with a small amount and accumulate a big corpus. With increased investment tenure, you can take little more risk with your investment with an aim to build greater wealth. Ideally, equity funds are considered best for long-term investment, and small-cap and mid-cap funds are optimal for an investment tenure of 20 years. However, when it comes to picking the best mutual fund for such a long-term, we often feel confused as to which factors to consider. Here, we have listed all of them and have also included the best SIP plans you can prefer to invest in.
Table of Content
In today’s time, SIP investment is one of the best investment options available in India where one earns great wealth in a long-term with disciplined investments. Through SIP, a fixed amount is auto-debited from the investor’s account every month for a set period of time. One can even increase or decrease investment value and redeem investments as per one’s choice. Let’s find out more about it and know how a small investment in one of the best SIP plans can help you become a crorepati in 20 years!
What Is SIP?
SIP or Systematic Investment Plan is an ideal way of investing in mutual funds. It allows investors to start with a small amount which is invested regularly after fixed intervals. One can invest on a quarterly, monthly, and even weekly basis.
Why Is SIP Beneficial for Long-Term Investment?
As most of the investors don’t have enough time and resources, SIP proves to be a viable option for them. Listed below are the important benefits of this instrument.
- Reduced risk because of Rupee Cost Averaging.
- SIP can be started with a very small amount of money, say Rs. 1000.
- Timing the market is not necessary.
- A long term financial goal can be aligned with this market-linked instrument.
- A disciplined approach towards investment helps in controlling the emotions.
Let’s consider an example here to understand the situation. Here, you can see how an investment of just Rs. 5000 monthly can help you be a crorepati in 20 years.
Taking,
Monthly Investment Amount: Rs 5000
Tenure of Investment: 20 Years
Expected Return Rate: 18%
Total Invested Amount after 20 Years: Rs. 1,200,000
Amount Earned After Investment: Rs. 11,717,436
Wealth Gain: Rs 10,517,436
Going with the above illustration, you too must be feeling the need to start an SIP. Let’s see where you can invest in to experience similar growth.
Top 5 SIP Plans to Invest in for 20 Years
1. SBI Small Cap Fund (G)
SBI Small Cap Fund is an ideal scheme for long-term aggressive investors looking for a perfect blend of the value and growth-style of investing under the small-cap category. Don’t worry if you haven’t got such high-risk appetite, as SIP and the investment horizon of 20 years can help you to reduce this associated risk to a great extent.
Stock selection is done based on strong conviction after evaluation of the five crucial parameters including competitive benefits, return on capital employed, management quality, potential growth, and valuation, and this has made the SBI Small Cap Fund a stellar performer under the category.
Fact Sheet
| AMC | SBI Mutual Fund |
| Scheme Name | SBI Small Cap Fund |
| Type | Open-ended equity scheme |
| Category | Small cap |
| Inception Date | 9-Sep-09 |
| Benchmark | S&P BSE Small Cap TRI |
| NAV (As on Sep 06, 2018) | INR 55.67 |
| AUM (May 31, 2018) | INR 8088.64 |
| Fund Manager | R. Srinivasan since Nov 2013 |
Asset Allocation
Past Performance: Annualized Returns
SBI Small Cap Fund (G)- SIP and Lumpsum Investment
| 3-Years SIP Returns | ||||
|---|---|---|---|---|
| Cumulative Investment Rs. 1000 | Growth Value | Absolute Returns | XIRR | |
| SBI Small Cap Fund (G) | 36000 | 54369 | 51.05% | 28.64% |
| 3-Years Lumpsum Returns | ||||
|---|---|---|---|---|
| Investment 3-Years ago | Growth Value | Absolute Returns | CAGR | |
| SBI Small Cap Fund (G) | 100000 | 193006 | 93.06% | 24.47% |
2. L&T Emerging Businesses Fund (G)
L&T Emerging Businesses Fund (G) is ideally meant for those investors who have a high risk-bearing appetite and are seeking high returns. The ones who are ready to invest in for a long-term period of 7 years or more to earn capital appreciation should prefer opting for this scheme. The fund’s return in comparison to its category is very high, since launch this fund has provided annual average returns of 26%. In the last three years, the returns are 25.86% which is much more than the average returns of its category.
Fact Sheet
| Category | Small Cap |
| Benchmark | S&P BSE Small Cap |
| Launch Date | 12th May, 2014 |
| Asset Size | Rs 5,539 crore (As on Aug 31, 2018) |
| Fund Managers | Mr. S.L Lahiri & Mr. Karan Desai |
| Expense Ratio | 2.43%(As on Jul 31, 2018) |
| Minimum Lumpsum | Rs 5,000 |
| Minimum SIP | Rs 500 |
| Exit Load | 1% for redemption within 365 days |
Asset Allocation
Past Performance: Annualized Returns
L&T Emerging Businesses Fund (G)- SIP and Lumpsum Investment
| Period | Amount Invested | Growth value | Absolute Return | XIRR | ||
|---|---|---|---|---|---|---|
| 3-Years SIP Return | 36000 | 49823 | 38.40% | 22.32% | ||
| As on July 31, 2018 | ||||||
| Period | Amount Invested | Growth value | Absolute Return | CAGR | ||
|---|---|---|---|---|---|---|
| 3-Years Lumpsum Returns | 100000 | 173630 | 73.63% | 20.23% | ||
| As on July 31, 2018 | ||||||
3.Kotak Emerging Equity Fund (G)
Kotak Emerging Equity Fund has topped the chart with its high returns in the mid-cap category and such stellar performance has led it to be in our list of recommendation. Launched on March 30th, 2007, this scheme by Kotak Mutual Fund is a throughout consistent performer.
This outperformance is a result of its robust risk management system and stable returns that it has been generating. This top performing mid-cap scheme has a well-diversified portfolio consisting of major allocation in mid-caps followed by large-cap and small-caps. The strategy of Kotak Emerging Equity Fund manager here is that by investing in small caps and large-caps, he is willing to generate high returns in the bull phase and a cushion of stability in the bear phase. Buying and holding investment style and a futuristic approach towards picking the best stocks for investment has helped the fund manager to earn such reputable position for this fund.
Fact Sheet
| Category | Mid Cap |
| Benchmark | Nifty Midcap 100 TRI |
| Launch Date | 3/30/2007 |
| Asset Size | Rs 3,327 crore (As on Jul 31, 2018) |
| Fund Managers | Pankaj Tibrewal |
| Expense Ratio | 2.34% (As on Jul 31, 2018) |
| Minimum Lumpsum | Rs 5,000 |
| Minimum SIP | Rs 1,000 |
| Exit Load | 1% for redemption within 365 days |
Asset Allocation
Past Performance: Annualized Returns
Kotak Emerging Equity Scheme (G)- SIP and Lumpsum Investment
| 3-Years SIP Returns | ||||
|---|---|---|---|---|
| Cumulative Investment Rs. 1000 | Growth Value | Absolute Returns | XIRR | |
| Kotak Emerging Equity Scheme (G) | 36000 | 46812 | 30.03% | 17.79% |
| 3-Years Lumpsum Returns | ||||
|---|---|---|---|---|
| Investment 3-Years ago | Growth Value | Absolute Returns | CAGR | |
| Kotak Emerging Equity Scheme (G) | 100000 | 150903 | 50.90% | 14.67% |
4. L&T Mid Cap Fund (G)
Considering the past record of this scheme of L&T MF, the fund has outperformed both its benchmark as well as the category at all time periods. Although in the past 3 years, the margin with which it has beaten the benchmark’s average has been reduced, the same has been maintained in the long-run. The past 5-year return of 30.95% is strong evidence of the outperformance of the fund beating both its category and benchmark’s average that have given 27.30% and 24.75% as on August 31, 2018. L&T Mid cap Fund’s portfolio constitutes 27 sectors and 77 holdings in all. This is evident of the strong diversification, and thus sound risk management done from the fund managers’ end. Considering the data above, the maximum allocation is done in the cyclical segments where good growth possibilities are seized.
Fact Sheet
| Fund House | L&T Mutual Fund |
| Inception Date | 9-Aug-04 |
| Type | Open-ended |
| Class | Equity |
| Category | Mid Cap |
| Net Assets (As on July 31, 2018) | Rs. 3,066 Crore |
| Expense Ratio (As on July 31, 2018) | 2.39% |
| Fund Managers | Soumendra Nath Lahiri since June 2013 and Vihang Naik since June 2016 |
| NAV (As on August 17, 2018) | Rs. 142.54 |
Asset Allocation
Past Performance: Annualized Returns
L&T Mid Cap Fund (G)- SIP and Lumpsum Investment
| Time-Period | SIP Investment | Lumpsum Investment | ||||
|---|---|---|---|---|---|---|
| Invested Moneys | Growth Value | Absolute Returns | Invested Money | Growth Value | Absolute Returns | |
| 3 Year | 360,000 | 453,736 | 26.04% | 100,000 | 154,680 | 54.68% |
| 5 Year | 600,000 | 1,041,283 | 73.55% | 100,000 | 354,086 | 254.09% |
| 10 Year | 1,200,000 | 3,657,644 | 204.80% | 100,000 | 76,012 | 476.01% |
| Returns: As on June 30, 2018 | ||||||
5. DSP Mid Cap Fund (G)
DSP Mid Cap Fund (G) is best-suited to investors who have a moderately high-risk appetite and are comfortable with an aggressive investment style. Also, if you want to get the full advantage of this fund, then stay invested for at least 5 to 7 years; and the more you increase your investment horizon, the better will your returns. This scheme is one of the best options for the purpose of wealth creation.
Fact Sheet
| Launch Date | 14-Nov-06 |
| NAV (as on Aug 17, 2018) | Rs 55.95 |
| AUM (as on Jul 31, 2018) | Rs 5,676 Cr. |
| Expense Ratio (as on Jul 31, 2018) | 2.19% |
| Exit Load | 1% (Redeemed before 365 days) |
| Minimum Investment | Rs 1000 |
| Minimum SIP Investment | Rs 500 |
Asset Allocation
Past Performance: Annualized Returns
DSP Mid Cap Fund (G)- SIP and Lumpsum Investment
| 3-Years SIP Returns | ||||
|---|---|---|---|---|
| Cumulative Investment Rs. 1000 | Growth Value | Absolute Returns | XIRR | |
| DSP Mid Cap Fund (G) | 36000 | 46841 | 30.11% | 17.83% |
| 3-Years Lumpsum Returns | ||||
|---|---|---|---|---|
| Investment 3-Years ago | Growth Value | Absolute Returns | CAGR | |
| DSP Mid Cap Fund (G) | 100000 | 151874 | 51.87% | 14.92% |
How to Pick the Best SIPs for Long-Term?
As said earlier, when planning investment for a long-term, equity mutual fund is the best asset class to invest in and in that too, one must opt for small cap and mid cap funds to gain better returns along with reduced risk. Selecting the best plan for oneself takes in great efforts, however, taking into account a few of the crucial points can assist you in making the right decision. Here are the points to take into account:
- Investment Objective of the Fund
When choosing a scheme for a tenure of 20 years, one must see its investment objective. The fund should be able to provide long-term capital appreciation and also cap losses when the market is volatile. Overall, investors should check that the risk associated with the fund matches with their individual risk appetite. - Past Performance
A consistent performer should be selected when investing for a long-term tenure like this one. This way, one can judge the capability of the fund manager whom he is trusting in with money. - Portfolio Allocation
The fund should have a balanced portfolio which is well diversified across sectors. Further, the inclination should be high in market sensitive segments and average in cyclical and defensive sectors. - Investment Strategy
The fund manager of the fund you have selected in for a long-term horizon should believe in following the buy and hold strategy whilst picking up quality stocks which help the fund to seek optimal growth. Rapid churning can influence the investors’ sentiments greatly which can be disturbing at times when the market experiences volatility. - Additional Expenses
Lastly, but one of the prominent steps to be checked is the expense that comes when you invest in any scheme. This could be management cost, exit load, etc.
Comparison Between Top Schemes for 20 Years of SIP Investment
Category, AUM, & Returns
| Category | Scheme Name | AUM (As on Jul 31, 2018) | Returns (As on Sep 05, 2018) | ||
|---|---|---|---|---|---|
| 3 Years | 5 Years | 10 Years | |||
| Small-Cap | SBI Small Cap Fund (G) | Rs 917 crore | 21.80% | 36.22% | N/A |
| Small-Cap | L&T Emerging Businesses Fund (G) | Rs 5,539 crore | 23.47% | N/A | N/A |
| Mid-Cap | DSP Midcap Fund (G) | Rs 5,696 crores | 16.15% | 29.09% | 18.44% |
| Mid-Cap | L&T Midcap Fund (G) | Rs 3,308 crore | 17.89% | 31.00% | 18.00% |
| Mid-Cap | Kotak Emerging Equity Scheme (G) | Rs 3,327 crore | 15.35% | 30.57% | 15.52% |
Risk
| Category | Scheme Name | Mean | Std Dev | Sharpe | Sortino | Beta | Alpha |
|---|---|---|---|---|---|---|---|
| Small-Cap | SBI Small Cap Fund (G) | 21.78 | 19.09 | 0.8 | 1.16 | 0.83 | 7.68 |
| Small-Cap | L&T Emerging Businesses Fund (G) | 22.39 | 18.3 | 0.87 | 1.1 | 0.86 | 8.08 |
| Mid-Cap | DSP Midcap Fund (G) | 16.09 | 17.24 | 0.56 | 0.83 | 0.95 | -2.48 |
| Mid-Cap | L&T Midcap Fund (G) | 17.78 | 16.1 | 0.71 | 0.94 | 0.9 | -0.14 |
| Mid-Cap | Kotak Emerging Equity Scheme (G) | 15.8 | 15.26 | 0.61 | 0.89 | 0.87 | -1.74 |
Conclusion
Depending upon your investment objective and risk appetite, you can choose to invest in any one or more schemes listed above. The decision you are making today of investing in SIP for 20 years can help you fulfill your investment goals. So, don’t delay in seizing the opportunity, for any concerns regarding this, connect with the experts at MySIPonline.
Recommended Reads:
- Know all about L&T Emerging Businesses Fund, read Fund Review L&T Emerging Businesses Fund
- Know all about SBI Small Cap Fund, read Fund Review SBI Small Cap Fund
- Know all about L&T Midcap Fund, read Fund Review L&T Midcap Fund
- Know all about Kotak Emerging Equity Fund, read Fund Review Kotak Emerging Equity Fund
- Know all about DSP Midcap Fund, read Fund Review DSP Midcap Fund
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